The Firstbuy scheme

DebtClearer

Guys in a few years I will be looking at getting my first house. I have looked at the Firstbuy scheme (http://www.rightmove.co.uk/firstbuy/)

On paper it sounds great and it says the following about the house I like: FIRSTBUY PRICE BASED ON 80% / 20% SHARED EQUITY SCHEME. FULL PRICE IS £169950. Aimed at first-time buyers, OWN YOUR OWN HOME WITH A MORTGAGE FOR JUST 80% of the property value with the remaining 20% supplied as an equity loan from the Government and Bloor Homes. Please ask for further details.

The house value listed on rightmove is £135,960. So is this basically saying you could go straight in to getting a mortgage with no deposit?
Does anyone know if these schemes are worth using or is there something I'm not seeing which means they arn't as good as I think?

What are the downsides?

kingstreet

You need a deposit. Typically 10%, although there may be one or two lenders accepting 5%.

You are purchasing all the property, not a share of it. The deposit bit is a loan from the builder/Government secured over the property. The loan is interest-free for five years. After that, you pay interest at a rate linked to inflation.

When you sell, you repay the loan which is based on the original percentage of the property you borrowed.

ie If you borrow 20%, you repay 20% of the sale price, if higher or lower.

As these schemes are linked to newbuild, you pay a premium for the property which will leave you owing more than the property is worth from day one. It takes a few years for this to rectify itself and for the property's second-hand value to reach what you originally paid.

Only a limited number of lenders accept shared equity business.